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    International Taxation In Nepal Tips To Foreign Investors
    International Taxation In Nepal Tips To Foreign Investors
    International Taxation In Nepal Tips To Foreign Investors
    Ebook77 pages1 hour

    International Taxation In Nepal Tips To Foreign Investors

    By Bhava Nath Dahal

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    About this ebook

    International Taxation in Nepal
    Tips to foreign investors

    LanguageEnglish
    PublisherBhava Nath Dahal
    Release dateSep 13, 2019
    ISBN9780463933602
    International Taxation In Nepal Tips To Foreign Investors

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      Book preview

      International Taxation In Nepal Tips To Foreign Investors - Bhava Nath Dahal

      International Taxation in Nepal

      Tips to foreign investors

      ACRONYMS

      AISR Anti-Income Splitting Rule

      BOOT Built, Own, Operate and Transfer

      DOI Department Of Industry

      DTAs Double Taxation Avoidance agreements

      FDI Foreign Direct Investments

      FoA Force of Attraction

      GAAR General Anti-Avoidance Rule

      IBN Investments Board of Nepal

      JV Joint Venture

      NPR Nepali Rupee

      OCR Office of the Company Registrar

      OECD Organisation for Economic Cooperation and Development

      PAN Permanent Account Number

      PE Permanent Establishment

      TCS Tax Collected at Source

      UN United Nations

      VAT Value Added Tax

      WHT Withholding Tax

      CORPORATE REQUIREMENTS

      01 May a foreign entity have business set up in Nepal?

      Yes, a foreign entity may have business set up in Nepal in almost all of the business industry except a few negative list industries. The corporate form of business may be either subsidiary or branch or similar structure. However, the representative or a liaison office cannot enter into a business activities according to provisions of corporate law. Few cases of subsidiary working in service sector, controlling shareholders must be resident of Nepal.

      For practical reasons and differences in various regulators, few cases like hydropower project, a subsidiary is a requirement over a branch or similar set up. In the other cases, a branch or similar set up is sufficient for Nepal business.

      02 What is the timeline for forming a liaison office, representative office, branch or a subsidiary?

      It depends upon the three factors of the business. Firstly, the line of business, whether there is requirement of license for that business or not. Secondly, the approval channel for the foreign direct investments (FDI). Thirdly, the regulatory approval, if the business requires that.

      Registration of a liaison office has only two requirements – permission from Department of Industry (DOI) and registration with Office of the Company Registrar (OCR). In case the applicant fulfills all the documentary requirements, permission from DOI takes few days and OCR takes just one or two days.

      Registration of a branch office has similar requirements as a liaison office. In this case, permission from Department of Industry (DOI) takes more time than a liaison office.

      There are two channels for approval of foreign investments – small and medium size foreign investments through Single-window procedure of Department of Industry (DOI) and large investments through Investments Board of Nepal (IBN). Once a foreign investor obtains license and letter of intent from either DOI or IBN, it can open a subsidiary.

      Opening a subsidiary or branch those requiring license takes a sizable time to obtain license from concern department.

      In all above cases, the corporate set up requires to obtained permission for FDI from central bank and require to register in Permanent Account Number of taxation authority. Both cases, it takes just a day, if all documentary requirements submitted well along with application.

      03 Are there special corporate governance requirements like total number of shareholders, directors, local resident director or local agent?

      Nepal corporate law permits single shareholder private company. Maximum shareholders in a private company or minimum shareholders in a public company has fixed by corporate law. Minimum A subsidiary of a public company is a public company. The number of minimum director in a public company is fixed in corporate law. In some business line like in banking, independent director (other than shareholders) is a requirement. In that case, local resident director appears, otherwise, subsidiary of a foreign company need not appoint local resident in its director.

      Foreign supplier or contractor bidding under public procurement laws, needs a local agent for its administrative assistance. However, a branch or a subsidiary need not any agent from resident local.

      04 Does Nepal business set up requires domestic documentation?

      Either cases of foreign branch or subsidiary or liaison office, requires to maintain sufficient documentation regarding its corporate decisions, financial transactions and foreign exchange transaction. They need to prepare books of accounts (language either in Nepali or in English). The books of accounts have to be audited by a person having certificate of practice on auditing.

      The documents those are not in Nepali or English need to be translated into Nepali on the cost of respective person. In the practice, translation into English is accepted.

      Each type of form of set up requires to file their corporate returns to OCR and tax return (even zero-return) to the taxation authority.

      The documents relating to a transaction must retain for six years from end of concern fiscal year.

      05 Does Nepal have any other basic regulatory issues?

      Foreign branch or subsidiary need to permission and requires to file details for any inwards foreign investments in either form of equity or borrowings. Similar permission and approval requires to repatriate repayments. Both processes are simple in easy-fashion. For importation of goods or services, permission for use of foreign currency is a requirement.

      Importing a new technology is welcomed but permission from DOI is required to pay the cost for import.

      Subsidiary company requires to file its periodic returns with OCR disclosing annual general meeting, extra-ordinary general meeting, appointment of auditors and other prescribed information.

      Nepal fiscal year or a tax-year is based on Nepali calendar, which starts somewhat mid-July and end on next mid-July. All the recordings require to follow Nepali calendar for the accounting, reporting, and filing any return. For a monthly return, only Nepali calendar month is permissible, which almost mid-month to mid-month basis. Foreign business person must

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